APFIVE Collusion in an Oligopolistic Market
When firms in an oligopoly collude to form a cartel, what is the relationship between the collusion and market outcomes relative to a competitive market?
A
Collusion does not affect market output or prices because individual firm strategies are still independent.
B
Collusion forces firms into a competitive equilibrium with prices equal to marginal cost.
C
Collusion reduces total market output and raises prices, mimicking monopoly outcomes.
D
Collusion increases market output and reduces prices to stimulate consumer demand.
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